Harley-Davidson Earnings: Retail Motorcycle Sales ShowContinued Strength

  • Worldwide Retail New Motorcycle Sales Climb 10.9 Percent in Fourth Quarter and 5.9 Percent for the Full Year
  • Full-Year Earnings Double on Motorcycle Shipment Growth, Improved Motorcycle Operating Margin and Financial Services Performance

MILWAUKEE, WI – January 24, 2012 – (Motor Sports Newswire) – Harley-Davidson, Inc. (NYSE: HOG) reported a strong finish to 2011, with improved fourth-quarter performance capping a year of earnings and dealer retail sales growth.

Income from continuing operations was $54.6 million, or $0.24 per share, in the fourth quarter of 2011, compared to a loss of $42.1 million, or $0.18 per share from continuing operations in the year-ago quarter. For the full year 2011, income from continuing operations more than doubled to $548.1 million, or $2.33 per share, compared to income of $259.7 million, or $1.11 per share, from continuing operations in 2010.

Retail sales of new Harley-Davidson motorcycles grew 10.9 percent worldwide in the fourth quarter compared to the prior-year period, including an 11.8 percent increase in the U.S. For the full year 2011, new Harley-Davidson motorcycle retail sales rose 5.9 percent worldwide and 5.8  percent in the U.S.

On a segment basis, full-year operating income from Motorcycles and Related Products grew 48.2 percent on higher shipment volume and operating margin improvement, while operating income from Financial Services grew 47.8 percent on continued improvement in credit performance, compared to 2010.

“Our improved performance in 2011 is the result of the tremendous efforts of all of our employees, dealers and suppliers,” said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc.

“Harley-Davidson is all about fulfilling dreams through remarkable motorcycles and extraordinary customer experiences. In 2011 we made strong progress at transforming our business to be more agile and effective than ever at exceeding customer expectations,” Wandell said. “The changes underway across the organization will enable Harley-Davidson to be world class and customer led like never before, with shorter product development lead times, flexible manufacturing and an unmatched premium retail experience.

“At retail, we believe the solid improvement in new Harley-Davidson motorcycle sales reflects the strong appeal of our product lineup to a diverse customer base and the great efforts of our dealers, combined with results from our investments in growth opportunities across all regions and improved consumer confidence in the U.S. While we are encouraged by the retail sales trend, we continue to keep a close watch on the marketplace and remain cautious in our expectations for 2012,” Wandell said.

Retail Harley-Davidson Motorcycle Sales

On a worldwide basis, dealers sold 40,359 new Harley-Davidson motorcycles in the fourth quarter of 2011, a 10.9 percent increase compared to 36,390 motorcycles sold in the year-ago period.  Dealers sold 23,753 new Harley-Davidson motorcycles in the U.S., an 11.8 percent increase compared to the fourth quarter of 2010. In international markets, dealers sold 16,606 new Harley-Davidson motorcycles during the fourth quarter, an increase of 9.7 percent compared to the year-ago period.

For the full year, worldwide retail sales of new Harley-Davidson motorcycles increased 5.9 percent to 235,188 units, compared to sales of 222,110 units in 2010. U.S. retail sales of new Harley-Davidson motorcycles increased 5.8 percent to 151,683 units, and in international markets sales increased 6.1 percent to 83,505 units, for the full year compared to 2010. Industry-wide U.S. heavyweight new motorcycle (651cc-plus) retail unit sales increased 4.3 percent for the full year, compared to 2010.

Fourth-quarter and full-year data are listed in the accompanying tables.

Harley-Davidson Motorcycles and Related Products Segment Financial Results

Fourth-Quarter Segment Results: Revenue from Motorcycles during the fourth quarter of 2011 of $791.9 million was up 13.5 percent compared to the year-ago period. The Company shipped 50,730 motorcycles to dealers and distributors worldwide during the quarter, compared to shipments of 44,481 motorcycles in the fourth quarter of 2010.

Revenue from Motorcycle Parts and Accessories (P&A) totaled $161.2 million during the quarter, up 7.9 percent, and revenue from General Merchandise, which includes MotorClothes® Apparel and Accessories, was $69.3 million, up 12.8 percent compared to the year-ago period.

Gross margin was 31.2 percent in the fourth quarter of 2011, compared to 29.6 percent in the fourth quarter of 2010. Fourth-quarter operating margin from motorcycles and related products was 3.5 percent on operating income of $35.6 million. In 2010, the Company had an operating loss in the fourth quarter from motorcycles and related products of $6.8 million.

Twelve-Month Segment Results: For the full year of 2011, the Company shipped 233,117 motorcycles to dealers and distributors, a 10.7 percent increase compared to 210,494 units shipped in 2010.

Revenue from Motorcycles for the full year was $3.55 billion, a 13.3 percent increase compared to the year-ago period. Full-year P&A revenue was $816.6 million, a 9.0 percent increase compared to 2010. General Merchandise revenue was $274.1 million, a 5.8 percent increase compared to 2010.

Gross margin for the full year was 33.4 percent and operating margin was 12.0 percent, compared to 34.2 percent and 9.1 percent respectively in 2010.

Financial Services Segment

The Financial Services segment recorded operating income of $56.8 million in the fourth quarter of 2011, compared to operating income of $43.5 million in the year-ago quarter. The increase in fourth-quarter operating income was largely the result of continued improvement in credit performance at Harley-Davidson Financial Services. For the full year, operating income from financial services was $268.8 million, compared to operating income of $181.9 million in 2010.

Guidance

Harley-Davidson expects to ship 240,000 to 245,000 motorcycles to dealers and distributors worldwide in 2012, a three-to five-percent increase compared to 2011. In the first quarter of 2012, the Company expects to ship 58,000 to 63,000 motorcycles.

For the full year, Harley-Davidson expects gross margin to be between 34.75 percent and 35.75 percent.  The Company expects capital expenditures of between $190 million and $210 million in 2012, which includes approximately $25 million to support restructuring activities.

Restructuring Update

In 2011, Harley-Davidson realized cumulative savings from restructuring activities initiated since early 2009 of $217 million, in line with company estimates of $210 million to $230 million. Upon completion, Harley-Davidson continues to expect restructuring activities to generate annual ongoing savings of $315 million to $335 million, beginning in 2014. For the full year 2011, Harley-Davidson incurred one-time restructuring costs of $68.0 million. The Company now expects all restructuring activities initiated since 2009 to result in one-time overall costs of $500 million to $520 million through 2013, including $50 million to $60 million in 2012, a $5 million reduction to the range previously provided.

Income Tax Rate

For the full year 2011, the Company’s effective income tax rate from continuing operations was 30.9 percent, compared to 33.5 percent in 2010.  The lower 2011 effective tax rate was mainly driven by a 2011 change in the Wisconsin income tax law associated with certain net operating losses, and a one-time tax charge in 2010 associated with the federal healthcare legislation. In 2012, the Company expects its full-year effective tax rate from continuing operations to be approximately 35.5 percent.

Cash Flow

Cash and marketable securities totaled $1.68 billion at year-end 2011, compared to $1.16 billion at year-end 2010. For full-year 2011, Harley-Davidson generated $885.3 million of cash provided by operating activities from continuing operations, compared to $1.16 billion in 2010. Capital expenditures for full-year 2011 were $189.0 million.

Share Repurchase

The Company repurchased 3.5 million shares of Harley-Davidson, Inc. common stock at a cost of $127.0 million during the fourth quarter of 2011. At year-end 2011, there were approximately 230.5 million shares of Harley-Davidson common stock outstanding and 18.6 million shares remaining on board-approved share repurchase authorizations.

Discontinued Operations

In the fourth quarter of 2011, Harley-Davidson recognized a $51.0 million benefit on income from discontinued operations, driven by the reversal of tax amounts reserved in prior years related to the divestiture of the Company’s MV Agusta subsidiaries. The amounts had been reserved pending an agreement with the IRS on the tax treatment of the transaction. With the agreement, the Company anticipates no further financial adjustments related to MV Agusta.

Company Background

Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Harley-Davidson Motor Company produces heavyweight custom, cruiser and touring motorcycles and offers a complete line of Harley-Davidson motorcycle parts, accessories, riding gear and apparel, and general merchandise. Harley-Davidson Financial Services provides wholesale and retail financing, insurance, extended service and other protection plans and credit card programs to Harley-Davidson dealers and riders in the U.S., Canada and select European countries. For more information, visit Harley-Davidson’s Web site at www.harley-davidson.com.

Conference Call and Webcast Presentation

Harley-Davidson will discuss fourth-quarter results on a Webcast at 8:00 a.m. CT today. The Webcast presentation will be posted prior to the call and can be accessed at http://investor.harley-davidson.com/. Click “Events and Presentations” under “Resources.” The audio portion of today’s call will also be posted at harley-davidson.com beginning approximately two hours after the conclusion of the call for one year. The audio may also be accessed until February 7, 2012 by calling 404-537-3406 or 855-859-2056 in the US, pin number36261875#.

Forward-Looking Statements

The Company intends that certain matters discussed in this release are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” or “estimates” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

The Company’s ability to meet the targets and expectations noted depends upon, among other factors, the Company’s ability to (i) execute its business strategy, (ii) effectively execute the Company’s restructuring plans within expected costs and timing, (iii) implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities, and secure data contained in those systems, (iv) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices,  (v) anticipate the level of consumer confidence in the economy, (vi) manage through inconsistent economic conditions, including changing capital, credit and retail markets, (vii) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (viii) successfully implement with our labor unions the agreements that we have executed with them that we believe will provide flexibility and cost-effectiveness to accomplish restructuring goals and long-term competitiveness, (ix) manage risks that arise through expanding international operations and sales, (x) manage supply chain issues, including any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xi) manage production capacity and production changes, (xii) provide products, services and experiences that are successful in the marketplace, (xiii) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xiv) manage the risks that our independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xv) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (xvi) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS’ loan portfolio, (xvii) sell all of its motorcycles and related products and services to its independent dealers, (xviii) continue to develop the capabilities of its distributor and dealer network, (xix) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xx) adjust to healthcare inflation and reform, pension reform and tax changes, (xxi) retain and attract talented employees, and (xxii) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation.

In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the Company has disclosed in documents previously filed with the Securities and Exchange Commission.

The Company’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company’s independent dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. In addition, the Company’s independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.

TABLES FOLLOW

Harley-Davidson, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

 

    (Unaudited)   (Unaudited)   (Unaudited)    
    Three months ended   Twelve months ended
    December 31,   December 31,   December 31,   December 31,
    2011   2010   2011   2010
                 
Motorcycles and related products revenue   $   1,026,777   $      917,076   $   4,662,264   $   4,176,627
Gross profit   320,451   271,066   1,555,976   1,427,403
Selling, administrative and engineering expense   265,918   260,153   926,808   885,137
Restructuring expense   18,970   17,671   67,992   163,508
  Operating income from motorcycles & related products   35,563   (6,758)   561,176   378,758
                 
Financial services revenue   157,153   166,322   649,449   682,709
Financial services expense   100,336   122,844   380,658   500,836
  Operating income from financial services   56,817   43,478   268,791   181,873
                 
Operating income   92,380   36,720   829,967   560,631
Investment income   2,338   1,776   7,963   5,442
Interest expense   11,165   20,209   45,266   90,357
Loss on debt extinguishment       85,247       85,247
Income (loss) before income taxes   83,553   (66,960)   792,664   390,469
Provision (benefit) for income taxes   28,909   (24,884)   244,586   130,800
Income (loss) from continuing operations   54,644   (42,076)   548,078   259,669
Income (loss) from discontinued operations, net of tax   51,036   (4,690)   51,036   (113,124)
Net income (loss)   $      105,680   $      (46,766)   $      599,114   $      146,545
                 
Earnings (loss) per common share from continuing operations:                
  Basic   $           0.24   $         (0.18)   $           2.35   $           1.11
  Diluted   $           0.24   $         (0.18)   $           2.33   $           1.11
                 
Income (loss) per common share from discontinued operations:                
  Basic   $           0.22   $         (0.02)   $           0.22   $         (0.48)
  Diluted   $           0.22   $         (0.02)   $           0.22   $         (0.48)
                 
Earnings (loss) per common share:                
  Basic   $           0.46   $         (0.20)   $           2.57   $           0.63
  Diluted   $           0.46   $         (0.20)   $           2.55   $           0.62
                 
Weighted-average common shares:                
  Basic   229,827   233,535   232,889   233,312
  Diluted   231,968   233,535   234,918   234,787
                 
Cash dividends per common share   $         0.125   $           0.10   $         0.475   $           0.40
             
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
             
    (Unaudited)        
    December 31,   December 31,    
    2011   2010    
             
ASSETS            
Current assets:            
    Cash and cash equivalents   $   1,526,950   $   1,021,933    
    Marketable securities   153,380   140,118    
    Accounts receivable, net   219,039   262,382    
    Finance receivables, net   1,168,603   1,080,432    
    Restricted finance receivables held by variable interest entities, net   591,864   699,026    
    Inventories   418,006   326,446    
    Restricted cash held by variable interest entities   229,655   288,887    
    Other current assets   234,709   247,402    
Total current assets   4,542,206   4,066,626    
             
Finance receivables, net   1,754,441   1,553,781    
Restricted finance receivables held by variable interest entities, net   2,271,773   2,684,330    
Other long-term assets   1,105,744   1,126,003    
    $   9,674,164   $   9,430,740    
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Current liabilities:            
    Accounts payable & accrued liabilities   $      819,885   $      782,017    
    Short-term debt   838,486   480,472    
    Current portion of long-term debt   399,916      
    Current portion of long-term debt held by variable interest entities   640,331   751,293    
Total current liabilities   2,698,618   2,013,782    
             
Long-term debt   2,396,871   2,516,650    
Long-term debt held by variable interest entities   1,447,015   2,003,941    
Pension and postretirement healthcare liabilities   571,065   536,847    
Other long-term liabilities   140,339   152,654    
             
Total shareholders’ equity   2,420,256   2,206,866    
    $   9,674,164   $   9,430,740    
             
Harley-Davidson, Inc.    
Condensed Consolidated Statements of Cash Flows    
 (In thousands)    
     
    (Unaudited)        
    Twelve months ended
    December 31,   December 31,   December 31,
    2011   2010   2009
             
Net cash provided by operating activities            
  of continuing operations   $      885,291   $   1,163,418   $      609,010
             
Cash flows from investing activities of continuing operations:            
  Capital expenditures   (189,035)   (170,845)   (116,748)
  Finance receivables, net   138,025   416,430   (771,058)
  Collection of retained securitization interests           61,170
  Net change in marketable securities   (12,532)   (100,148)   (39,685)
  Other, net       2,834
Net cash (used by) provided by investing activities of continuing operations   (63,542)   145,437   (863,487)
             
Cash flows from financing activities of continuing operations:            
  Proceeds from issuance of medium-term notes   387,865     496,514
  Repayments of medium-term notes     (200,000)  
  Proceeds from issuance of senior unsecured notes       595,026
  Repayments of senior unsecured notes     (380,757)  
  Proceeds from securitization debt   1,082,599   598,187   2,413,192
  Repayments of securitization debt   (1,754,568)   (1,896,665)   (263,083)
  Net increase (decrease) in credit facilities and unsecured commercial paper   237,827   30,575   (1,083,331)
  Net repayments of asset-backed commercial paper   (483)   (845)   (513,168)
  Net change in restricted cash   59,232   77,654   (167,667)
  Dividends   (111,011)   (94,145)   (93,807)
  Purchase of common stock for treasury   (224,548)   (1,706)   (1,920)
  Excess tax benefits from share-based payments   6,303   3,767   170
  Issuance of common stock under employee stock option plans   7,840   7,845   11
Net cash used by financing activities of continuing operations   (308,944)   (1,856,090)   1,381,937
             
Effect of exchange rate changes on cash and cash equivalents            
  of continuing operations   (7,788)   4,940   6,789
             
Net increase (decrease) in cash and cash equivalents of continuing operations   505,017   (542,295)   1,134,249
             
Cash flows from discontinued operations:            
  Cash flows from operating activities of discontinued operations     (71,073)   (71,298)
  Cash flows from investing activities of discontinued operations       (18,805)
  Effect of exchange rate changes on cash and cash equivalents            
    of discontinued operations     (1,195)   (1,208)
      (72,268)   (91,311)
             
Net increase (decrease) in cash and cash equivalents   $      505,017   $    (614,563)   $   1,042,938
             
Cash and cash equivalents:            
  Cash and cash equivalents – beginning of period   $   1,021,933   $   1,630,433   $      568,894
  Cash and cash equivalents of discontinued operations – beginning of period     6,063   24,664
  Net increase (decrease) in cash and cash equivalents   505,017   (614,563)   1,042,938
  Less: Cash and cash equivalents of discontinued operations – end of period           (6,063)
  Cash and cash equivalents – end of period   $   1,526,950   $   1,021,933   $   1,630,433
                 
 

Motorcycles and Related Products Revenue and

 Motorcycle Shipment Data
 
    (Unaudited)   (Unaudited)   (Unaudited)    
    Three months ended   Twelve months ended
    December 31,   December 31,   December 31,   December 31,
    2011   2010   2011   2010
MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands)                
  Harley-Davidson( R ) motorcycles   $      791,917   $      697,781   $   3,553,291   $   3,136,987
  Buell( R ) motorcycles   67   4,546   1,256   16,280
  Parts & Accessories   161,182   149,395   816,569   749,240
  General Merchandise   69,315   61,458   274,124   259,125
  Other   4,296   3,896   17,024   14,995
    $   1,026,777   $      917,076   $   4,662,264   $   4,176,627
                 
MOTORCYCLE SHIPMENTS:                
  Harley-Davidson                
    United States   33,625   27,617   152,180   131,636
    International   17,105   16,864   80,937   78,858
      Total Harley-Davidson   50,730   44,481   233,117   210,494
                 
  Buell   10   63   274   2,614
                 
MOTORCYCLE PRODUCT MIX:                
  Harley-Davidson                
    Touring   21,592   18,514   92,002   81,927
    Custom   19,933   17,835   91,459   87,158
    Sportster( R )   9,205   8,132   49,656   41,409
      Total Harley-Davidson   50,730   44,481   233,117   210,494

 

 

                 
Worldwide Retail Sales of Harley-Davidson Motorcycles
                 
    Three months ended   Twelve months ended
    December 31,   December 31,   December 31,   December 31,
    2011   2010   2011   2010
North America Region                
  United States   23,753   21,246   151,683   143,391
  Canada   1,214   1,022   10,502   10,376
    Total North America Region   24,967   22,268   162,185   153,767
                 
Europe Region (Includes Middle East and Africa)                
  Europe*   5,997   5,938   39,334   37,378
  Other   1,059   731   5,006   3,810
    Total Europe Region   7,056   6,669   44,340   41,188
                 
Asia Pacific Region                
  Japan   2,574   2,951   10,401   11,405
  Other   3,270   2,750   11,015   9,582
    Total Asia Pacific Region   5,844   5,701   21,416   20,987
                 
Latin America Region   2,492   1,752   7,247   6,168
                 
    Total Worldwide Retail Sales   40,359   36,390   235,188   222,110
                 

 

Data Source (subject to update)                
Data source for retail sales figures shown above is new sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales, and this information is subject to revision.        
                 
Only Harley-Davidson( R ) motorcycles are included in the Harley-Davidson Motorcycle Sales data.            
                 
* Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

 

       
         
Heavyweight Motorcycle Registration Data(1)
         
    Twelve months ended
    December 31,   December 31,
    2011   2010
United States(2)   271,018   259,733
         
    Eleven months ended
    November 30,   November 30,
    2011   2010
Europe(3)   284,853   294,351
         

 

1 – Heavyweight data includes street legal 651+cc models. Street legal 651+cc models include on-highway, dual purpose models and three-wheeled vehicles.
         
2 – United States data is derived from information provided by Motorcycle Industry Council (MIC). This third party data is subject to revision and update. Prior periods have been adjusted to include all dual purpose models that were previously excluded.
         
3 – Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data includes 651+cc models derived from information provided by Association des Constructeurs Europeens de Motocycles (ACEM), an independent agency. Europe market data is reported on a one-month lag. This third-party data is subject to revision and update.

SOURCE: Harley-Davidson, Inc.

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